Those conversations are having a positive impact, as rents at Simon’s centers continued their upward journey and strong shopper traffic drove sales productivity and comparable-space sales growth. More than 1,200 lease deals were signed in the second quarter, an increase of 20 per cent on the same period last year. Rent spreads on new leases were 17 per cent positive, as competition for space forced retailers to shell out more for the privilege of setting up shop. Portfolio occupancy remained at 96 per cent in the second quarter, but the company’s leadership has previously noted that 97 per cent or higher was feasible. The company’s outlet portfolio was particularly affected by the closure of about 1 million square feet of demised Saks Off 5th stores. However, this is another instance of mass department store closures – OK, so Saks Off 5th is technically not a department store, but it is close enough – delivering a significant opportunity to the mall owner, as the re-leased space will ultimately yield well over twice the rent Saks was paying. According to Eli Simon, progress with the re-leasing is already well advanced: “If you look at the boxes in the outlets, they were paying US$18 million in rent. But we’ll basically take the US$18 million and turn it into US$44 million.” He was coy about revealing the names of retailers taking the space, not wanting to say anything the retailers themselves had not said publicly. Nonetheless, it is another chapter in the now-long history of department store take-backs for mall owners, in which moribund space is made vibrant again by being divided and re-leased to more relevant tenants. The average base minimum rent across the US portfolio continued to rise, increasing 6.3 per cent to US$62.42 per square foot in the second quarter. Simon told analysts on the company’s conference call that strong tenant demand was evident across all regions and platforms. It included retailers from the technology, athleisure, home and jewelry categories, as well as retailers targeted particularly at Gen Z. Some brands originated online, some came from Europe and others emerged from the Asian beauty and collectibles sectors. Restaurants also received a special callout: “We have a number of high-profile developments and redevelopments that have started and will start over the next year or so. We are going to add probably US$400 million to US$500 million of incremental restaurant sales from some of the biggest names out there on a regional and national basis.” Revenue rises 20 per cent Total revenue for the second quarter came to US$1.79 billion, up almost 20 per cent from the same quarter a year ago. This brought revenue for the first half of the year to US$3.548 billion, which was also a year-over-year increase of just under 20 per cent. Net after-tax income attributable to Simon’s stockholders decreased by 13.1 per cent to US$483.1 million in the second quarter and was flat at US$962.7 million for the first half. Funds from operations (FFO), a non-GAAP real estate investment trust metric that adds depreciation back into net income, was virtually flat compared with the prior year at US$1.185 billion. FFO rose by 4.5 per cent in the first half to US$2.293 billion. Sales productivity continues to surge on strong shopper traffic Shopper traffic was strong during the quarter, growing by 2 per cent, and the trend continued into July. In the first six months of the year, sales in comparable spaces increased by 6.3 per cent, while domestic portfolio productivity climbed nearly 14 per cent to US$838 per square foot for the trailing 12 months. Variable lease income – the portion of lease income that is not fixed and varies according to tenant sales – increased 110 basis points to 18.9 per cent of total lease income. There were no new mall openings in the first half, as the company focused its capital investment on upgrades and expansions of existing projects. The improvements include densification projects involving the addition of mixed-use components, primarily residential developments and hotels. At the end of the first half, the portfolio consisted of 175 malls and premium outlets in the US, 16 Mills megamalls and 42 international malls and outlets. Of the international projects, 19 are in Asia, including 10 in Japan and seven in Korea. In the US portfolio, the non-anchor tenants accounting for the most space are Gap, with 312 stores occupying more than 3.2 million square feet; Knitwell Group, with 435 stores and 2 million square feet; American Eagle Outfitters, with 243 stores and 1.6 million square feet; and Victoria’s Secret, with 140 stores and 1.2 million square feet. Its biggest anchor tenants are Macy’s, with 111 stores, and JCPenney, with 54 stores. Are some malls doing more of the heavy lifting? Simon’s leadership has been at pains to fend off suggestions that the top 50 or so malls in the portfolio were carrying the water for the entire business. Simon again noted this week that tenant demand and comparable-store sales growth were well diffused across the portfolio. Retail brands are certainly taking more space in B malls than they did when the A-mall-plus-e-commerce strategy was the only model retail commentators discussed. Even so, it remains a concern for the mall industry that anything less than “trophy” properties and A malls faces long-term survivability challenges. The distribution of growth – and not just the top line – will be something to watch closely in the coming months as a bellwether for both the health of the mall industry generally and retailers’ appetite for expansion. Further reading: Simon Property Group doubled its profit in 2025